PCs challenged by tablets, smartphones

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Laptops were on display at the 2012 International Consumer Electronics Show in Las Vegas in January.

By Steven Syre
Globe Columnist
October 05, 2012

Remember the minicomputer?

Once upon a time, back in the 1970s, the minicomputer became wildly popular as a new kind of business technology tool that was much more nimble and portable than the old mainframe monsters. The new giants of that age — Massachusetts companies like Digital Equipment Corp., Wang Laboratories Inc. and Data General Corp. — helped turn Route 128 into America’s Technology Highway.

Then the next wave of tech evolution — the personal computer — arrived and killed every minicomputer company that didn’t see the future or failed to adapt. That means all of them.

I’m prompted to dust off that small bit of history now by a growing sense of déjà vu. This time, the personal computer is the old technology facing an uncertain future. More mobile computing, on phones and tablets, is growing at an astonishing rate and turning the tech landscape upside down.

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The comparison with the extinction of the minicomputer market isn’t perfect. This time, it’s difficult to imagine personal computers — desk top models or laptops — disappearing the way minicomputers vanished. But it’s also hard to miss the signs that we are right in the middle of a generational technology shift that is gaining enormous momentum.

“Nobody bemoans the fact that the minicomputer isn’t in use anymore because the PC made real computing power available to the masses, and that’s a great thing,” says Peter Falvey, president of the Boston technology investment banking firm Falvey Partners.

“The increasing mobility of computing power and the cloud are generally positive things, and people are speaking with their wallets. It’s for the PC industry to adapt; the onus is on them,” he says.

Consider some recent developments at the most important companies that make the computing hardware and other products:

■ Hewlett-Packard Co. shares plunged to a 10-year low this week when chief executive Meg Whitman said the world’s biggest maker of personal computers wasn’t making much progress with its turnaround plan. Hewlett-Packard shares are down 42 percent this year, ranking 499th among companies that make up the Standard & Poor’s 500 index.

■ Google Inc. recently surpassed Microsoft Corp. in stock market value. Google, which has transitioned smoothly into the more mobile world, is worth $251 billion. Microsoft, which has struggled to make the same leap, has a stock value of $250 billion.

■ Dell Computer Inc., once a giant among personal computer makers, has lost 35 percent of its market value this year — among the 10 worst stocks in the S&P 500. Dell shares trade near their price of 15 years ago.

■ Shares of Advanced Micro Devices Inc., a big maker of personal computer semiconductors, are trading at a three-year low and rank 498th among the S&P 500 companies this year.

■ Applied Materials Inc., a big supplier to firms that make computer chips, said it will lay off as much as 9 percent of its workforce.

Apple Inc. became the world’s most valuable company this year precisely because it mastered the new tech shift better than anyone else. The bulk of the increase in Apple’s soaring revenues in the past fiscal year came from sales of iPhones and iPads. Those two products generated more than $67 billion of revenue in Apple’s last full fiscal year — nearly as much as total sales recorded at Microsoft.

Apple is also one of the rare personal computer makers that has posted substantial sales growth in that category. The company sold $21.8 billion worth of desktop and laptop Macs in its last fiscal year, an increase of about 50 percent during three years.

But Apple will almost certainly generate more revenue selling iPads than personal computers this year, for the first time.

Sales in the personal computer industry have a long history of ebbs and flows. A troubled global economy extended the replacement cycle among business customers and that has affected recent sales trends. PC sales in the United States were down about 5 percent in the second quarter of 2012.

Still, that only explains a part of the story. The quick embrace of tablet computing — not just by individuals but also in some workplaces — is eating into PC sales. Ever more access to wireless Internet connections and continued growth of cloud computing — putting more technology horsepower in the hands of anyone with access to the Web — will only accelerate that trend.

The personal computer may not be the new minicomputer. But it’s in for the fight of its life.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.

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